I am faced with a dilemma. My wife just took $10,000 and paid off one of her student loans while we are saving for a house. Now she wants to pay the other loan off ($57,000.) before we buy a house. Can anyone give a good reason why to do one or the other? Thanks so much!
Kevin Football: Why not ask a local banker what they think. if the interest rate on the student loan is under 4%, consider keeping the loan. A mortgage is going to be between 3 1/2 % and 4 1 /2%. while I understand what your wife is saying (she does not wish to have loan payments as well as mortgage payments) you will have to save a lot longer if you use the cash you have to pay down the debt. the bank will take into account what loans need paying down.
I would say it depends on the amount of debt you can support. 57,000 + a mortgage will crush a lot of families, but if you are both making significant and secure incomes, it might be fine for you to have both. Student loans and mortgages are "less bad" debt in that you are getting a tax deduction on the interest, so really its about what your budget and life style can tolerate as far as debt repayment.
obviously if you have saved $67K so far, it is not beyond your abilities to save again after getting rid of a bothersome student loan
however interest rate on that is very small and you can use some of the amount you pay to reduce your gross income(thus your taxable as well)
if you have jointly been frugal to save this kind of money you have done it jointly thus you are equally responsible to decide which way you want to go
Jess t who answered this couldn't have answered it better.
Those debts may hinder your ability to get a mortgage, but if you can get one I would get the house now as prices tend to go up on housing.
Buy a house of course.
Debts should be Paid or Managed depending on your financial statements ( income, assets, liabilities) . This is not a question for strangers to answer.
Your outstanding loan might be a problem when qualifying for a home mortgage — too much debt to add more debt.
Depends a lot on how much the two of you make, how much you have in savings, and what the interest rate is on the loans.
Sit down with somebody who can run the numbers out – see what you'll be actually paying for the loans in interest and fees – and then sit the plans down beside one another. And then once you get that house, take a look at the advantage of prepaying just a tiny amount on your Principle each month. Makes a huge difference.